NEW YORK—Results from the May 2016 Survey of Consumer Expectations (SCE) indicate that inflation expectations remained essentially unchanged. Earnings growth and household income growth expectations retreated somewhat, while job loss and job finding expectations bounced back from a deterioration in April.

The main findings from the May 2016 Survey are:

Inflation

• Median inflation expectations were essentially unchanged at both the one-year and the three-year ahead horizon (2.6 percent and 2.7 percent, respectively).
• The median expected home price change rose slightly from 3.1 percent to 3.2 percent, but remained within the narrow 3.0-3.2 percent range that has prevailed since July 2015. The increase was driven by higher income and higher educated respondents.
• Median one-year ahead gasoline price change expectations declined from 6.9 percent in April to 5.5 percent in May, approaching the series’ average of a 4.9 percent expected increase.
• Expectations for changes in the price of food, medical care and college education all declined, while expectations of rent price changes remained flat.

Labor Market

• Median one-year ahead expected earnings growth declined from 2.4 percent to 2.2 percent, driven mostly by younger and lower educated respondents. There was a noticeable uptick in uncertainty¹ about year-ahead earnings growth.
• Mean unemployment expectations (that is, the mean probability that the U.S. unemployment rate will be higher one year from now), fell slightly from 39.3 percent in April to 39.1 percent in May. The perceived likelihood of an increase in unemployment has been trending upward since January 2015.
• The mean perceived probability of losing one’s job in the next 12 months declined from 15.8 percent to 14.9 percent, partly reversing the significant increase in April. On the other hand, the mean probability of leaving one’s job voluntarily in the next 12 months also declined from 23.1 percent to 21.8 percent. Both series have been on a slight upward trend since the beginning of the year.
• The mean perceived probability of finding a job in the next 3 months (if the current one were lost) bounced back from 52.9 percent to 55.4 percent, back to levels seen through most of 2015. The increase was particularly pronounced among younger, lower educated and lower income respondents.

Household Finance

• Median expected household income growth retreated from 2.8 percent in April to 2.4 percent in May, indicating a pause in the upward movement observed since January. The decline was driven mostly by individuals with less than a college degree, and by older and middle income respondents.
• Median household spending growth expectations were unchanged at 3.5 percent, and remain at the relatively low levels that have prevailed since July 2015.
• Both the perceived change in credit availability compared to a year ago and one-year ahead credit availability expectations remained essentially unchanged from April.
• The average perceived probability of missing a minimum debt payment over the next three months increased slightly from 12.4 percent in April to 12.8 percent in May, but remains within the 10.9 percent-13.0 percent range observed since January 2015.
• Expectations of household financial situation one-year ahead deteriorated slightly.

About the Survey of Consumer Expectations
The SCE contains information about how consumers expect overall inflation and prices for food, gas, housing and education to behave. It also provides insight into Americans’ views about job prospects and earnings growth and their expectations about future spending and access to credit. The SCE also provides measures of uncertainty in expectations for the main outcomes of interest. Expectations are also available by age, geography, income, education and numeracy. 

The SCE is a nationally representative, internet-based survey of a rotating panel of approximately 1,200 household heads. Respondents participate in the panel for up to twelve months, with a roughly equal number rotating in and out of the panel each month. Unlike comparable surveys based on repeated cross-sections with a different set of respondents in each wave, our panel allows us to observe the changes in expectations and behavior of the same individuals over time.

The survey is conducted on our behalf by The Demand Institute, a non-profit organization jointly operated by The Conference Board and Nielsen. The sampling frame for the SCE is based on that used for The Conference Board’s Consumer Confidence Survey (CCS). Respondents to the CCS, itself based on a representative national sample drawn from mailing addresses, are invited to join the SCE internet panel.

¹ The June release of the SCE includes a minor revision to some of the derived variables included in our chart data series and micro-data file spanning the life of the survey since its inception in June 2013. The series mostly affected by this revision are those involving our uncertainty measures (for inflation, home price changes, and earnings growth).

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